Saturday, 12 October 2013

The City and the LibDems - The Water that We Breathe

In L. P. Hartley's book "The Go-Between" the first line is "The past is a foreign country, they do things differently there". Well may we paraphrase this sentence to read "The City is a foreign country, they do things differently there" to sum up the mystification of the British public and political class with what goes on in the Square Mile and its American-controlled enclave, Canaray Wharf. 

Having worked in the City, on Wall Street and in the Australian and Argentine stockmarkets, I have found myself often over the years at dinners and parties in conversations with people outside the financial sector who regard what goes on within as something somewhat akin to the rituals of a mysterious cult. However for those of us within the sector, finance is no mystery and we are like goldfish swimming around in our pond not imagining being in any other medium or indeed like humans not thinking about the air they move through and breathe until there isn't any of it.

The point I am getting to here is that the City, if it is a different country, is one in which the LibDems cannot afford to be strangers. This very week, Vince Cable was the front man for the successful privatization of the Royal Mail, arguably the greatest success in privatization since the glory days of People's Capitalism under Mrs T. (and I say that with a straight face). If privatization "to and for the people" was not a Liberal slogan at the time, then it should have been, and maybe we can furtively rewrite the history books and claim it as our idea in the first place.

Maybe my memory fails me (and I was working in stockbroking in the City at the time, albeit at the bottom of the heap in settlements) but in those deals, the public were prioritized over institutions in allocations with prospectuses published in the broadsheets for all and sundry to punt upon the sale of the likes of British Gas, Rolls Royce and TSB. In this day and age though, the siren songs (and remember what happened those enchanted by such lieder) of Goldman Sachs have prioritised institutional investors and hedge funds (flippers disguised as real investors) over the public. Fortunately though the deal that Vince Cable cooked at least let the "institutions" cannibalize each other in the feeding frenzy with ₤30bn (supposedly) in over-subscriptions with the public being the end winners from this process (despite what Chukka might think).  

LibDems (or at least some of us) need to get our brains wrapped around the City and what it does. We should make it our own... make common cause with the pillars of capitalism and use them to reshape the country in our vision. The first tranche of the Lloyds Bank sell-off was biased towards the "instos" but Vince should see the writing on the wall here and insist that the public get first bite of the apple in the sale of the government's residual stakes in both Lloyds and RBS. Beyond that, we should be thinking seriously along the lines that used to exist back in the Golden Age of the 1980s when prospectuses were compulsorily published for hoi polloi to be given a chance of participating in the IPO (Initial Public Offering) process. We date the decline of People's Capitalism (and the City as a place of relevance to the UK public) to the removal of this requirement with its corollary being the dominance of the US investment banks in the UK equities business. These people are dedicated to the concept of cultivating their symbiotic relationship with the great and good of the hedge fund world, while the public are viewed as the suckers who end up paying top dollar last in the line. "Let them buy in the after-market" is their mantra. Our mantra should be (like Maggie's)  "let the institutions buy in the after-market". 


Under Major and New Labour there was a love-in with the Canary Wharf crowd. And who was this crowd? Well amongst them there was Bear Stearns, Lehman Brothers and Refco, the poorly supervised progeny of the SEC. From the mid-1980s, the British-owned firms in the space ran up the white flag and names like Warburg, Kleinwort, Morgan Grenfell and scores of lesser lights were sacrificed on the altar of globalisation of markets.

All well and good... Capitalism is Darwinian and financial capitalism is Darwinian in the extreme. But then what happened was that once the UK-owned institutions were rubbed out, the door was slammed shut. The regulators made life hellacious for new start-ups and most UK-owned stockbroking firms and investment banks have remained but stunted shrubs in a compliance-driven nightmare of costs and supervision that US investment banks can easily (though expensively) negotiate while any homegrown contenders remain priced out of the game. The LibDems need to evolve a policy of caveat emptor in the financial space instead of the current nanny-state that advantages the big US institutional players to the disadvantage of UK-owned stockbrokers and merchant banks. The nanny-state school of financial regulation is a cruel trick, already successfully employed in the US to ensure concentration and domination for what is called the Bulge Bracket firms. They are the enemies of People's Capitalism. They are the unwinders of the opening that Big Bang, in 1987, brought to the City and to the British investing public. It has been all downhill (until this week) at the hands of the US investments banks and their sycophants and acolytes in the ranks of the Tory and Labour finance nomenklatura

LibDems exist in the City and the financial sector and they should be marshalled for the cause and used as a brain's trust to formulate policy where clearly the Tories and Labour are clueless (or worse...hand in glove with Wall Street's best and brightest). For this reason in recent months, I started up an initiative of Liberal Drinks in the City and it has gained traction with a number of events already having been held. The City may seem like another country to some LibDems but for the likes of the powers-that-be within the leadership its about time they were seen more in its alleys and by-ways, but with loins well-girded and always wary that the front-men  now for the financial space need to be sorted into those who might advance the national interest and those whose real loyalty lies in Midtown Manhattan.  

1 comment:

  1. A pedant writes...

    It begins "The past is a foreign country..."

    ReplyDelete